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ROBUSTNESS OF BIDDER PREFERENCES AMONG AUCTION INSTITUTIONS
Author(s) -
IVANOVASTENZEL RADOSVETA,
SALMON TIMOTHY C.
Publication year - 2008
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2007.00111.x
Subject(s) - ceteris paribus , economics , microeconomics , bidding , common value auction , risk aversion (psychology) , loss aversion , robustness (evolution) , vickrey auction , auction theory , mathematical economics , expected utility hypothesis , biochemistry , chemistry , gene
In previous work, we found that bidders strongly prefer the ascending to the first‐price sealed‐bid auction on a ceteris paribus basis, but perhaps surprisingly, they are not willing to pay up to an entry price for the ascending auction that would equalize the profits. Risk aversion was proposed as an explanation. In this study, we examine two alternative explanations for the observed behavior: loss aversion and aversion to the dynamic bidding process. We find that neither alternative explanation can account for bidders’ auction choice behavior, leaving risk aversion as the only unfalsified hypothesis. ( JEL C91, D44)